Nottingham City Council has granted permission for the Stone Soup Learns Free School at 14 High Pavement, next to the Galleries of Justice.
The new state-funded school will be run by education charity Stone Soup, which currently provides vocational courses for people in the city.
It hopes the school will provide an alternative choice for young people who are unable to attend a mainstream or special school.
"We believe that every young person has the opportunity to succeed by being motivated and inspired.
"The school aims to develop young people into unique, responsible, receptive, discerning human beings with a sense of their own value.
"The school will be structured to nurture the social development of all the young people it works with, most of whom experience significant disadvantages."
Free schools can be set up by anyone who can prove there is a need for a particular type of education in an area.
They are funded by the Government but have the freedom to set their own curriculums.
The Stone Soup project was established in 2002 and is based in the Old Knows Factory in St Ann's Hill Road.
The new school will have space for 100 pupils aged between 11 and 19, who would study subjects including construction, creative industries, fashion and textiles.
There will also be a restaurant, which will include a training kitchen to teach food hygiene and other hospitality courses and a restaurant that will be open to the public.
The school will feature a media studio in the basement and workshops for carpentry and other vocational classes.
It will also have a training area for retail and marketing studies and space to exhibit the work produced by students, occasionally allowing the public to purchase work on display.
The school day will run from 9.30am until 3pm, with a supervised lunch break between 12.15pm and 1pm. It will have the same school terms as city council-run schools.
Alterations to the building will include the removal of a flat roof, side extension, new partitioning, new stairs and a new lift.
It is hoped that the school will open by September.